New Data Supports Previous Bleak Outlook for World Economy

Matty-Sways

U.S. and eurozone services-sector softened in September suggesting a downturn is spreading to other parts of the globe.

New signs of slowdown in the world economy have pushed down asset prices this week and raised expectations for further action by central banks to support growth.

In the U.S., services activity continued to grow, but at a sloooooow pace.

The Institute for Supply Management’s U.S. nonmanufacturing index was 52.6 (lowest since August 2016) in September down from 56.4 in August. previously reported IHS Markit services index was 50.9 in September. A reading above 50 indicates an expansion in activity, while a reading below 50 indicates a contraction.

The threat of a recession is still ever present in the eurozone as the area faces the added headwind of new tariffs on its exports to the U.S. Plans to swiftly impose tariffs on $7.5 billion in aircraft, food products and other goods from the European Union after the World Trade Organization authorized the levies Wednesday, citing the EU’s subsidies to Airbus SE.

The September slowdown in services was sharpest in Germany, whose factory output has already fallen on cooling demand for its exports and problems in its key automobile sector.

IHS Markit said the composite eurozone PMIs for the three months of the third quarter point to growth of just 0.1% “at best.”

“The risk of recession is now very real,” said Chris Williamson, IHS Markit’s chief business economist.

“German industry is in recession, and this is now also impacting the service providers catering to those companies,” said Claus Michelsen, an economist at the German Institute for Economic Research.

The composite PMI for Germany fell to 48.5 in September from 51.7 in August, pointing to an economic contraction. It was the lowest reading in almost seven years.

“Deferred client orders and reduced consumer spending as a result of Brexit uncertainty and a slowing global economy meant hard-pressed businesses started to lose their battle against the hardest conditions for about a decade,” said Duncan Brock, group director at the Chartered Institute of Procurement and Supply.

In Japan a report released Thursday pointed to a less sharp slowdown in services activity, with the PMI for that sector falling to 52.8 from 53.3.

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